Buying My First Rental (that I live in!)

[Cameron C.]

Hey BP,

I'm looking for some advice and/or for you to poke holes in my current situation.  Let me preface this with the caveat that I know I would like to move elsewhere (maybe outside of Pittsburgh even) within the next 2 years.

I've lived in a hot rental area (Southside) for the past 2.5 years and have constantly been poking my landlord about his interest to sell.  I live in a 4BR 2.5bath 2,400 sqft standalone townhome that currently rents for $2,600 month.  The home is a 5 minute commute to downtown Pittsburgh and is nestled in between two large colleges (Pittsburgh/Duquesne).  I am very confident that it will be easy to rent in the future.  We have reached a tentative verbal agreement to of $285,000, no realtor commissions, I pay closing costs.  I'm a licensed realtor myself so I have access to all the standard paperwork to process the transaction.  I am looking to do a 3% convention and will attempt to "house hack" this property by continuing to charge my other 3 roommates their share of $650/bedroom. 

I've ran through countless analysis calculators and I tend to think I'm over complicating the deal.  Aside from the major capital expenditures that I would escrow for, I have reservations about a few legal intricacies.  For example, he bought the house 10 years ago and did a complete flip with great quality materials but I'm still questioning whether or not the proper permits were obtained.  This was not a quick flip or poorly done job.  Another reason I am interested.  Another reservation I have is relative to a Pittsburgh ordinance for single-family dwellings that prohibit more than 3 unrelated individuals to enter into a lease.  My house is a legitimate 4BR (4 - 150+ sqft BRs) and I'm wondering if there is an "exception" status anyone has heard in the past that would allow me to protect myself legally in the future if I were to move out and want to rent this property to 4 individuals. 

All in all, I think it's a good (not a fantastic one) deal in a great area that is very developed and in high demand.  There is no question the sticker price is what is primarily scaring me.  As a first investment property I wonder if I'm stretching myself too far with a property in this price range.  I expect to be able to acquire the property for under 20k out of pocket and I'm pretty confident it will cash flow each month, despite not meeting some of the fancy ratios and rules thrown out here on BP.  I'm really looking for some advice of other things to keep my eye out for and/or due diligence I could do in the meantime to make me more comfortable with "jumping in". 

Thanks in advance!!

Cam